Case 13-04747 Doc 4-1 Filed 02/08/13 Entered 02/08/13 19:22:43 Desc Exhibit 1- Emergency Motion for Use

of Cash Collateral Page 1 of 6

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION In re: CIRCLE FAMILY HEALTHCARE NETWORK, an Illinois Not-For-Profit Corporation Debtor. ) ) ) ) ) ) ) In Chapter 11 Case No. 13 B 04747 Honorable A. Benjamin Goldgar Motion Date: Motion Time:

EMERGENCY MOTION FOR ENTRY OF ORDER PERMITTING DEBTOR INTERIM USE OF CASH COLLATERAL BELONGING TO NCB CAPITAL IMPACT AND U.S. BANK NATIONAL ASSOCIATION Debtor, CIRCLE FAMILY HEALTHCARE NETWORK, an Illinois Not-For-Profit Corporation, (Debtor), by and through its attorneys, GOLAN & CHRISTIE LLP, moves this Court to enter an order permitting interim use of cash collateral belonging to NCB CAPITAL IMPACT f/k/a NCB DEVELOPMENT CORPORATION (hereinafter NCB) and U.S. BANK NATIONAL ASSOCIATION (hereinafter US Bank) in support thereof represents to the Court as follows: BACKGROUND 1. On February 8, 2013, Debtor filed a voluntary case under Chapter 11 of Title 11

of the United States Code ("Bankruptcy Code"). 2. Debtor is in the business of education services, community development initiative

and providing limited health care. 3. This Court has jurisdiction over this Application pursuant to 28 U.S.C. 157 and

1334. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. This matter is a core proceeding pursuant to 28 U.S.C. 157(b). 4. No creditors committee has been appointed in these cases. No trustee has been

appointed. No patient care Ombudsman has been appointed.

Exhibit 1

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SECURITY INTEREST OF NCB 5. On or about January 10, 2006, NCB and Debtor entered into a loan and security

agreement (the NCB Loan Agreement), pursuant to which NCB agreed to extend a loan to refinance an existing line of credit debt with NCB used by the Debtor in the amount of $485,000.00 (the NCB Loan.). A copy of the Loan is attached hereto as Exhibit A. 6. On or about February 1, 2006, and in connection with the NCB Loan, Debtor

executed a promissory note in the amount of $485,000.00. A copy of the promissory note is attached hereto as Exhibit B. 7. Pursuant to Section 8 of the NCB Loan Agreement, the NCB loan was secured by

Debtors accounts receivable that were less than 90 days old and other instruments, general intangibles, contract rights and proceeds, chattel paper and proceeds, inventory, equipment, furniture and fixtures (the Collateral). 8. NCB allegedly holds a lien on the Collateral. It filed an initial UCC-1 financing

statement with the Illinois Secretary of State under Filing No. 12345658 on July 27, 2006 attached hereto as Exhibit C. No continuation statement has been located. 9. NCB alleges a balance due of $86,282.55 as of the date of filing. SECURITY INTEREST OF US BANK 10. On or about November 1, 2008, Park National Bank (hereinafter referred to as

Park National) and Debtor entered into a Business Loan and Commercial Security Agreement (the Park National Loan Agreements), pursuant to which Park National agreed to extend a loan and refinanced a previous loan for the total sum of $300,000.00 (the Park National Loan.). A copy of the Loan Agreements are attached hereto as Group Exhibit D. 11. Pursuant to the Park National Loan Agreements, the Park National Loan was

secured by all of Debtors general business assets including all inventory, equipment, accounts

Exhibit 1

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(including but not limited to all health-care-insurance receivables and grants), instruments, general intangibles, contract rights and proceeds, chattel paper and proceeds, inventory, equipment, furniture and fixtures (the Collateral). 12. Upon information and belief, the Park National Loan was transferred, sold or

assigned and after multiple transfers is currently held with US Bank. 13. On or about December 1, 2011, US Bank and the Debtor entered into an

Extension Agreement of the Park National Loan for the principle amount of $298,538.00 (hereinafter known as the US Bank Agreement). 14. US Bank allegedly holds a valid perfected lien on the Debtors assets to the extent

set forth in the Park National Loan Agreement. The most current UCC-1 financing statement filed by US Bank with the Illinois Secretary of State under Filing No. 9098825 on March 11, 2011 is attached hereto as Exhibit E. 15. US Bank alleges a balance due of $$226,311.00 as of the date of filing. DEBTOR REQUIRES USE OF CASH COLLATERAL 16. The Debtor requires the use of its cash collateral as it is defined in Section 363(a)

of the Bankruptcy Code and requests authorization of this Court to utilize the cash collateral pursuant to the provisions of Section 363(c)(2)(B) of the Bankruptcy Code. A statement showing Debtors anticipated expenses is attached hereto as Exhibit F. 17. Neither NCB nor US Bank will be harmed by the interim use of cash collateral

generated from the assets and proceeds thereof. Further, Debtor proposes to grant NCB and US Bank replacement liens upon the assets Debtor acquires subsequent to the filing of the Chapter 11 petition to the extent of the collateral utilized, subject to verification of the extent and validity of their liens. In addition, as adequate protection, Debtor proposes to grant NCB and US Bank replacement liens upon the proceeds from assets Debtor acquires subsequent to the filing of the

Exhibit 1

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Chapter 11 petition to the extent that the collateral is utilized subject to verification of the extent and validity of the lien. 18. The use of collateral held by the NCB and US Bank will cause little, if any, harm

to NCB and US Bank. Conversely, the harm to the Debtor will be substantial because the use of cash collateral is essential to its status as a going concern. Debtor proposes to make monthly adequate protection payments to NCB in the amount of $6,015.00 until a hearing on a final order for use of cash collateral can be heard in order to protect NCB from any erosion of its lien upon the Debtors assets due to the continuance of the automatic stay pursuant to 362 of the Bankruptcy Code. In addition, Debtor proposes to make monthly adequate protection payments to US Bank in the amount of $4,085.00 until a hearing on a final order for use of cash collateral can be heard in order to protect US Bank from any erosion of its lien upon the Debtors assets due to the continuance of the automatic stay pursuant to 362 of the Bankruptcy Code. The Debtor further believes that NCB and US Bank are fully protected for the value of their liens provided by replacement liens to the extent of collateral utilized. The amounts being offered to NCB and US Bank are the average sums that they were receiving pre-petition. NATURE OF EMERGENCY 19. The Debtor has no other non-designated sources of income for its overhead costs

including but not limited to salaries, benefits, rents, medical supplies, laboratory expenses, utilities, insurance and other items required to operate its business. If Debtor is not given the use of cash collateral, it will be unable pay its ongoing expenses as described in Exhibit F. If Debtor is unable to pay the ongoing expenses, it will be unable to pay its employees, pay rent and acquire supplies and provide health care services. In turn the Debtor will then be forced into a premature liquidation.

Exhibit 1

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20.

Pursuant to Rule 4001(b) of the Bankruptcy Rules, Debtor must give 14 day

notice to all creditors and parties in interest of a motion requesting leave to use cash collateral. However, pursuant to Rule 4001(b)(2), the court may conduct a preliminary hearing before the 14 day period expires as is necessary to avoid immediate and irreparable harm. NOTICE 21. Notice of this Emergency Motion has been served upon the Trustee, all parties

holding a lien upon the Debtors assets and the twenty largest creditors. Debtor believes that it is appropriate to reduce the time for notice of this application. DISCLOSURE PURSUANT TO LR 4001-2 22. Debtor represents that none of the provisions of the proposed cash collateral

warrant highlighting as required by LR 4001-2. WHEREFORE, Debtor, CIRCLE FAMILY HEALTHCARE NETWORK, an Illinois NotFor-Profit Corporation, prays that an order be entered as follows: A. Authorizing it to utilize cash collateral to the extent needed pursuant to the

attached budget; B. Granting NCB and US Bank liens on the proceeds from assets Debtor acquires

subsequent to the filing of the Chapter 11 petition to the extent that the collateral is utilized subject to verification of the extent and validity of the lien; C. Authorizing Debtor to make adequate assurance payments to NCB in the amount

of $6,015.00 pending the final hearing on use of cash collateral; D. Authorizing Debtor to make adequate assurance payments to US Bank in the

amount of $4,085.00 pending the final hearing on use of cash collateral; E. F. Reducing the time required for notice to all creditors and parties in interest; Setting the matter down for final hearing on use of cash collateral; and

Exhibit 1

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G.

For such other and further relief as this Court deems just and proper.

CIRCLE FAMILY HEALTHCARE NETWORK, an Illinois Not-For-Profit Corporation, Debtor,

/s/

Robert R. Benjamin______ Robert R. Benjamin One of its attorneys

Robert R. Benjamin (ARDC # 0170429) Beverly A. Berneman (ARDC # 06189418) GOLAN & CHRISTIE LLP Attorneys for Debtor 70 West Madison, Suite 1500 Chicago, Illinois 60602 312-263-2300

Exhibit 1